Question: Paying Taxes?

Our principal heard that our PTO may have to pay taxes if we earn over a certain amount or hold more than a certain amount of fundraisers. We have never heard this before. Maybe it's a PTA thing? Any truth to this? (we will be tax exempt as soon as we pay $800 to be reinstated - the person last year didn't return the postcard to maintain our tax exempt status). Any information would be appreciated. Thank you!

Asked by Anonymous

Answers:

Advice from PTO Today

Craig writes:
No truth to it. Your tax-exempt status isn't affected by how many fundraisers you run or how much you raise or – another myth that seems to go around – how much money you hold over from year to year. The IRS actually publishes a pretty good pamphlet about maintaining compliance. Here's a link to a pdf of it.

Community Advice

mum24kids writes:
What state are you in? I know that several years ago, there was a law in place in Texas where you got two "free" fundraisers a year, but then you had to pay sales tax for any over that. I'm not in Texas, so I don't know the details of it or if it is still in place. But you might want to check your state sales tax laws.

But for Federal taxes--ditto what Craig said.

Community Advice

gjcoram writes:
There are some regulations concerning unrelated business income; look at this page from the IRS:
http://www.irs.gov/Charities-&-Non-Profits/Unrelated-Business-Income-Defined
and then follow the link about modifications, exclusions, and exceptions.

Advice from PTO Today

Craig writes:
Regarding unrelated business income tax, it's good to be aware of it, but it doesn't apply to the vast majority of the ways parent groups raise money. It doesn't apply to standard fundraisers, family events, running an after school program, etc.

The standard to be subject to unrelated business income tax is that the activity has to be a regular trade or business (you do it on a consistent basis) that isn't related to your core purpose. The one activity that comes to mind that might be subject to UBIT and that a few parent groups participate in is running a thrift shop. For those most part, though, it's not something to get too worried about.

Community Advice

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